Islamic Finance | |
Islamic Finance | |
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Tuesday, November 17, 2020 / 11:01 AM /
Bukola Akinyele-Yisau for WebTV /Header Image Credit: Business Day NG
Islamic finance has continued to prosper and gain
prominence across the globe spurred by the adoption of socially
responsible and investment principles. The CEO of the Nigeria Stock Exchange
Mr. Oscar Onyema, OON made this point as a keynote speaker at the 2020 NSE/Red
Money Islamic Finance Nigeria On Air Forum Report 2020, which explored how
Islamic Finance and Banking can flourish in the country.
He said, from the Islamic Finance Development report
2019, the $2.5trn industry recorded a growth of 3% in 2018 from $2.4trn
in 2017. This positive growth was fuelled by the increase of Sukuk Issuances
amidst continuous appetite from investors for alternative assets.
Non-Interest Banking Looks Up
Onyema believed Islamic banking is beginning to take
shape in Nigeria with the emergence of new regulations and markets to support
the industry growth, which has resulted in a growing number of players
resulting in two Islamic banks, four takaful insurance companies, several
microfinance banks, and managed funds.
Also, he noted that the Islamic finance industry has
recorded steady growth since its inception in the 1970s. S&P global
ratings industry estimated that the $2.4trn industry is expected to register
role to meet single-digit growth in 2020 and 2021 amidst the impact the public
amidst economic crises fuelled by the COVID19 pandemic.
Looking at the investor base for the Sukuk the NSE CEO
acknowledged that it has also expanded with several sovereigns and financial
institutions from Hong Kong, UK, Malaysia, Indonesia, Pakistan, GCC Countries
and Turkey participating.
He was of the view that the Osun State N10bn 7yr
Ijara Sukuk in 2013 and the appetite of increasing ethical finance in
Nigeria, has brought to the fore 3 successful Sukuk issuances with a total of
N350bn by the FGN from 2018 till date which was largely oversubscribed.
Speaking further he believed that as normalcy returns,
the Islamic finance industry had a critical role to play in global
economic recovery. In June 2020, the Islamic Development Bank (IsDB) raised
$1.5bn with a first Sukuk of sustainability designed to have a COVID 19 for its
member countries.
He spoke further on other developments which included
the emergence of new Islamic banks in the Philippines, Algeria and Afghanistan
as well as the development of new liquidity tools in the UK and Pakistan that
aided the growth of the existing Islamic banking market.
He believed the advent of the COVID-19 pandemic is
shifting the dynamics to the industry and the outbreak may create new
opportunities for Islamic finance markets by accelerating socially responsible
investing, sustainability and digitization.
Also, in June 2020 he informed stakeholders that the
Indonesian government-issued US$2.5bn global Wakalah Sukuk in 3 three tranches
including a $759m Green Sukuk to support the government coronavirus control
programme.
Speaking on the regional prospects with the African
Continental Free Trade Agreement (AfCFTA) in January 2021, tasked
stakeholders in the Islamic finance market to explore opportunities to promote
continental trade by providing shariah compliance trade finance products.
as well as deploying trade development programs to shift greater attention to
socio impact, sustainability and innovation in trade finance.
Catching The Digital Bug
The NSE CEO made the point that post-pandemic,
Islamic finance in Nigeria and the World at large must work towards more
integrated and transformative growth through digitization.
According to Onyema, financial technology elements
such as smart contract, tokenized assets and crowdfunding platforms would
facilitate a greater number of Islamic finance assets at the bottom of the
investment pyramid. In a post-COVID-19 world, he said Islamic financial
institutions should provide more touchpoints with MSMEs with better
standardized processes.
In his conclusion, the NSE's CEO said the potential
for the Islamic capital market remains large and would likely expand over the
years underpinned by new markets, products and issuances. He said that
investors' appetite paved the way for success in exploring opportunities in the
real estate, derivatives and alternative investment buckets.
"Over the years, the NSE has helped issuers to raise
non-interest instrument by directing long-term capital towards infrastructure
and high social impact projects including education," he said.
Onyema pledged that the Exchange would continue to
provide an efficient and liquid market where investors and businesses in Africa
could invest and raise sharia-compliant capital. He assured stakeholders of
continued collaboration to collectively contribute towards the growth of
Islamic finance in Nigeria and Africa at large with relevant individual skills
and knowledge to bridge the educational gap and drive sustainable economic
growth.
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